Single Family or Multi Family for first time Property Investor?

Question

Hi guys,

What are your opinions should I go invest in a single family or multi family unit as a first time investment property buyer? Do you have any additional advice on buying non-local and out of state properties as I am a first time investor who lives in the California Bay Area so there are not many local deals. Would love to hear input on finding agents for these transactions as well as property managers for the area!

Zach Lemaster · Answer

@Danny Terry

Lots of good questions. My opinion is that both SFR & MF have their place & benefits, but the question is where to start. For most newer investors we typically recommend SFR properties to start with the idea of building equity to scale up to MF over time. It's important to have a well diversified portfolio not only geographically, but also across different asset classes. In the markets we invest in SFRs typically have better quality tenants, longer term tenants, definitely better appreciation, better financing (20% down vs 25% down), and they are more liquid. When it comes time to sell the property you can sell to an investor or a residential buyer. SFR are more predictable starting out, but it is important to have multiple SFRs so you have multiple streams of income & you are not relying on just one stream of income. Then over time you can easily scale up to larger MF. Just one strategy we work with our investors on, but as long as you are getting started at some level that is the most important concept!

For your location question it really depends on your goals & criteria. We strategically choose to invest in locations that have positive cash flow, landlord friendly legislation, low taxes, population & economic growth, etc. California does not fit most of that criteria, and has many many challenges for investors in building a real successful portfolio. It can take a ton of money to get into one deal that may not even be positive cash flow in CA. The most successful investors invest where they can get the best returns, which more often than not is not their local market. You just need the right local team to work with of course! We've built a very successful portfolio this way that has allowed us to leave our professional careers as doctors. Just my two cents, but I hope this helps. I'm more than happy to answer any specific questions you have.

@Justin Mann

Thanks for the mention! We very much look forward to hopefully working with you in the near future!

Here are some more references for us if anyone is interested in reading past investors' experiences:

https://www.biggerpockets.com/users/ZacharyCole/references

Justin Mann · Answer

I have been looking as well. My current direction is to try a SFH first. I was very tempted to do a commercial MFH but I would be putting all my eggs in one basket so to speak. I think I am going to do the first property through renttoretirement.com after contacting them from the BP podcast advertisement.

Single Family or Multi Family for first time Property Investor?

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